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Budget 'Dream Team' Assembles Bipartisan Package of Cost Controls

By John Reichard, CQ HealthBeat Editor

April 18, 2013 -- The Bipartisan Policy Center recently released recommendations it said would save $560 billion in health spending over the next decade while also reengineering medical care to emphasize a team-based treatment.

The architects of the plan said it offered a road map to bipartisan action in Congress.

Although the plan aims to overhaul health care widely, Medicare changes were prominent among its recommendations. Medicare is a large enough payer to drive change throughout the health care system, the authors of the plan said. The Medicare revisions would account for $300 billion in savings while expanding taxation of health insurance to discourage employers from offering high-cost plans would save $260 billion.

Bipartisan Policy Center President Jason Grumet said the recommendations were prepared by a "dream team" of budget analysts who created "a new policy space for Congress to explore."

Among those who prepared the plan were Republican Pete Domenici, former senator from New Mexico, and Alice Rivlin, a Democrat who was the first director of the Congressional Budget Office. Also involved were an all-star cast of budget and health aides: Bill Hoagland, longtime GOP staffer on the Senate Budget Committee and an assistant to Tennessee Republican Bill Frist when he served as Senate Majority Leader; Sheila Burke, who served as chief of staff to GOP Senator Robert Dole of Kansas; and Chris Jennings, the senior health aide in the Clinton White House. MIT economist Jonathan Gruber worked on the tax provisions.

Former Senate Majority Leader Tom Daschle, who served as a Democratic senator from South Dakota, said a key element of the plan is moving away from fee-for-service based payment which leads to unnecessary services. The aim it to have health care "coordinated through organized systems rather than volume-driven and fragmented."

"We focus on improving the entire system of care," the report says in explaining why the proposal is different. "We have also brought bipartisanship to the table, dedicating nearly a year to reasoned negotiations to break through the partisan rhetoric," it added. "We sought policy options around which both sides of the political aisle could realistically coalesce."

Rivlin explained during a news briefing that the plan would add "Medicare Networks" as a third option to the Medicare alongside the fee-for-service program and Medicare Advantage. Rivlin said the networks would be "ACOs on steroids," referring to the some 300 accountable care organizations in Medicare that contract to meet quality and savings targets that trigger bonus payments if met.

ACOs currently do not permit beneficiaries to share in any savings they generate but the new proposal would change that. Beneficiaries enrolling in a Medicare Network would pay lower premiums. "They and their providers also could share in savings that result from greater quality and efficiency," the report says.

For the most part, doctors, hospitals, and other providers now participating in Medicare ACOs receive bonuses if they meet savings targets but they are not penalized for missing them. Under the proposal, that too would change. The report calls for financial disincentives to stay in the less efficient fee-for-service system. Medicare Advantage also would be changed so that payments were no longer pegged to levels of spending in the traditional Medicare fee-for-service program. Instead, plans would file bids on what they would charge to offer a standard package of benefits and payments would be set based on those bids. But competitive bidding among plans would only occur in parts of the United States where that system would generate savings.

Medicare fee for service would change too through a greater commitment to competitive bidding to determine reimbursement levels for products and services and through bundling payments so that efficient providers who worked together could share in any savings generated by their cooperation.

Medicare benefits would be revamped. There would be a single deductible, first dollar coverage by Medigap policies would be prohibited in an effort to discourage the unnecessary use of services, and there would be a cap on yearly out-of-pocket spending for covered services. Visits to the doctor would not be subject to the deductible.

On the tax side, the proposal would replace the health care law's current "Cadillac tax" on high-cost health plans that starts in 2018. Instead, it would establish a tax in 2015 on that portion of premiums above the 80th percentile for single and family employer-sponsored health insurance.

The center's 142-page plan also would address medical liability and loosen scope of practice rules to expand those who could provide primary care, among other changes.

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